Liability management is the process of keeping appropriate liquidity reserves and allocating assets by financial institutions to balance outstanding liabilities such as deposits, CDs, and so on to obtain best performance by simultaneously meeting liabilities and growing net assets. Banks have several risks - asset management risk, interest rate risk, and currency exchange risks - and by using liability management, banks and financial institutions try to minimize the risk.
In this chapter, we have discussed several topics, such as market risk, portfolio risk, credit risk, fraud detection, diversification of portfolios, optimization of portfolios, and rebalancing of the portfolio, which can help financial in situation with liability management.
